Rental Property Insurance: A Guide for Landlords

Renting out your property can be a good investment and bring in steady income. This is especially true if your property is located in a high-demand area.

Of course, being a landlord comes with its own set of challenges. Maintaining the properties you own, being available when things break, and dealing with tenants are all a part of the job.

As a landlord, you will need to make sure that you have the appropriate rental property insurance. Keep reading to find out about the various choices, or reach out to us for a rental property insurance quote.

What Kind of Insurance Do You Really Need for Investment Properties?

You may need different policies to protect your rental properties and business. One important insurance to get before your first tenant is landlord insurance.

What Is Landlord Insurance?

Landlord insurance, also known as rental property insurance, is property coverage for buildings or residences that you own and rent to others, including liability coverage for any injuries that may occur on the premises.

The property coverage is similar to homeowners insurance coverage, except for the coverage for belongings inside unless you choose to furnish the home/unit. While homeowners insurance is coverage for the property you live in, landlord insurance is coverage for properties that you rent to others. In insurance terms, a rental property is considered a “non-owner occupied” residence.

What Does Rental Property Insurance Cover?

Rental property insurance protects you from financial losses if the building that you rent out is damaged by a covered peril. If a windstorm rips off siding, or if hail impacts the roof, your landlord insurance will cover the claims resulting from this damage.

Rental property insurance also protects you from liability claims if someone is injured on your property.

Does Rental Property Insurance Cover Tenants’ Property?

Many people think renters are protected by their landlord’s insurance, but that’s not true. Rental property insurance does not cover your tenants’ belongings.

Tenants will need to arrange their own renters insurance to make sure they’re protected. Landlords should ask tenants for proof of renters insurance to protect against potential risks and damages. Accidents and disasters can happen. Tenants and landlords should know what their insurance covers.

For more detail on what is covered by renters insurance, be sure to read The Basics of Renters Insurance.

What Other Insurance Policies Should Landlords Consider?

You should consider getting separate policies to protect your property, especially for damage that isn’t covered by your standard policy. Here are some examples to think about:

Flood Insurance

Basic property insurance does not cover flood damage. Flooding occurs when water touches the ground before entering a building. This differentiates flooding from other types of water damage, such as a hole in the roof or a burst pipe.

Many properties can flood, even if they are not close to a lake or ocean. Flood risk is higher than people may think. You can learn more about flood insurance by reading Everything You Need to Know About Flood Insurance.

Earthquake Insurance

Earthquakes, like floods, can cause widespread and catastrophic damage, so insurance policies typically exclude them from basic property coverage.

Although most people associate earthquakes with California, fault lines exist in many parts of the country. Talk to your insurance agent or fill out a form to see if your rental property is at risk. Consider adding an earthquake policy rider if necessary.

Personal Umbrella Insurance

If you’re renting out a property you own, think about getting extra liability coverage to protect yourself. Umbrella insurance gives extra financial protection if a legal problem goes beyond what your regular insurance covers. Having enough liability coverage is absolutely essential, so talk to your insurance agent about coverage limits.

Landlord Rent Default Insurance

Becoming a landlord might involve some challenges, such as tenants who stop paying rent. Landlord rent default insurance is specialized coverage that will protect you if your tenant stops paying rent and disappears, or if a tenant is called up on active duty and has to break the lease for military service. This type of insurance can be expensive, but it could be worth investigating depending on your individual situation.

Rental Income Insurance

Sometimes called fair rental income insurance, this can help replace the rental income you receive from tenants in the event that a covered peril has caused so much damage that your tenants can no longer live in the building.

Let’s say you own a building that has four rental units in it. A fire breaks out and heavily damages two of the units, and the remaining two units have water and smoke damage. You now have four rental units that are uninhabitable. Half of them might be repaired in a short amount of time, while the other half will take much longer.

Rental income insurance provides temporary replacement for lost rental income when units cannot be rented out. Rental income insurance provides temporary replacement for lost income when rental units cannot be rented out.

This insurance does not cover physical damage to the building or repairs. It also does not cover lost income from unoccupied apartments or tenants breaking the lease. Rental income insurance is meant to cover the income lost when your tenants can’t occupy the unit and are therefore not paying rent.

Check with your insurance agent or connect with an Expert Agent today to find out what type of situations are covered by rental income insurance.

What Doesn’t Rental Property Insurance Cover?

Some situations may not be covered by insurance. It is your responsibility as a landlord to ensure the property is well-maintained. Here are some of the situations that are excluded:

• Pests, bugs and infestations: Bedbugs, mice, roaches and other creepy-crawlies are not covered by insurance. Ensure you keep all your rental properties in good and safe condition to prevent infestations.
• Damage from general wear and tear: Keeping track of maintenance records and schedules is an important part of being a landlord. Your landlord insurance does not cover damage resulting from ignoring a maintenance issue. Address leaks and other maintenance issues quickly — before they balloon into expensive repairs.

What If I’m Just Renting Out a Room in My Home?

If you are renting a room in your home to a tenant, you will need to closely review your homeowners insurance policy. Because renting could increase your liability, your homeowners insurance may not cover you. It might even be a violation of the terms of your existing homeowners insurance policy, and your insurance company could cancel your policy.

Talk to your agent about the room you will be renting. They’ll probably want to know how long you intend to rent the room and how many renters you will have. Here are some questions they might ask:

• Is it being rented to a family member or to someone you don’t know?
• Will the room be offered furnished with your belongings, or will the renter(s) provide their own furnishings?
• Is it a long-term rental or a series of short-term rentals on a platform such as Airbnb?

The answers to these questions will help your insurer to determine what type of insurance policy is most appropriate for your situation. Depending on the details, your agent could keep your homeowners policy as-is, increase your premium, or suggest that you look into rental property insurance.

Landlord or rental property insurance is available to insure an entirely separate residence or an individual room, but availability may vary by insurer if you’re just renting a room. This is because it no longer fits the definition of a “non-owner occupied” property.

Your individual circumstances will determine the type of insurance you need, so it is important to talk to your agent if you’re planning on renting a room — before you accept a tenant.

Renting Your House While Waiting to Sell

If you’re struggling to sell your house but the rental market in your area is hot, renting out your home until you can sell it might seem like a great solution. Be aware that this makes you a landlord — even if you weren’t planning on becoming one — and you’ll probably need rental property insurance.

Talk to your insurance agent or fill out a form here and find out what kind of coverage you need if you are renting a house you no longer live in full-time, even if your intent is to sell as soon as possible.

How can I get a quote for my rental property insurance?

Renting out properties can bring in money, but being a landlord comes with extra risks. Protect your investments and finances by getting enough property and liability insurance. Take steps to ensure you are adequately covered.

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